How strongly is global warming related to the financial market? Probably more than expected. Just think of the consequences of climate change: floods, drought, hurricanes and other climate-related natural disasters have a strong impact on stock market prices. Since pension funds invest in the stock market, the financial provision for the future of the “average citizen” also hangs by the proverbial thread. Carbon Delta developed a methodology that assesses climate-related risks and opportunities and provides decision support to investors. Oliver Marchand, CEO & Co-Founder of Carbon Delta, explains the newly developed “Climate Value-at-Risk” method in this article.
The effects of climate change affect not only people and animals, but also companies and investors. The international climate report therefore urgently calls for climate change to be limited to 1.5 degrees. The financial markets play a central role in achieving this goal.
The Zurich-based start-up developed the “Climate Value-at-Risk” model. This analyzes the climate-related risks and opportunities of listed companies on the basis of its own and public data. At the same time, it estimates changes in the value of businesses when climate-related events occur. It thereby enables and stimulates both investors and reinsurers to invest sustainably.
What are the challenges for Carbon Delta?
According to CEO & co-founder Oliver Marchand, Carbon Delta faces two specific challenges in addition to the generic challenges that most start-ups face. First, Carbon Delta’s product is very complicated and scientific, so a lot of work goes into it, making it expensive. On the other hand, a great deal of interaction with customers is necessary to gain their trust in the product.
The model enables investors, regulators and reinsurers to protect assets, optimize performance and achieve long-term sustainability goals. When more capital is diverted into ESG-compliant portfolios, this promotes the further development and scaling potential of sustainable companies and indirectly reduces emissions.
The company aims for the ‘Climate Value-at-Risk’ tool to become the global standard tool for climate risk in the financial industry. Essentially, this is to ensure that climate change is factored into every financial transaction through this tool and that all financial transactions are aligned to lead to greater compatibility with the established 2-degree target.
How can the solution set be multiplied and scaled?
The Climate Value-at-Risk model can be applied to portfolios in any way and further developed, thus opening up new investment opportunities at the same time.
